Housing

6/2/09 Housing

"The month of May has been a rollercoaster ride for retailers and unfortunately ended on a negative note," said Michael Niemira, ICSC chief economist. "The good news is that the year-over-year pace remains positive which may indicate some rebounding of sales." He forecast May sales, excluding the results from Wal-Mart Stores Inc., to be down by 2% because of the absence of the year-earlier federal tax rebates. Wal-Mart said last month it will stop reporting its monthly same-store sales.

The unemployment rate in the 16-nation euro zone jumped to 9.2% in April, its highest reading since September 1999, the European statistics agency Eurostat reported Tuesday.

Australia's current-account deficit widened in the first quarter to a seasonally adjusted 5.08 billion Australian dollars ($4.1 billion) from the revised 4.18 billion Australian dollars deficit seen in the fourth quarter of 2008, data from the Australia Bureau of Statistics showed Tuesday.

Cameron International Corp. has agreed to acquire Natco Group in an all-stock transaction that values Natco at about $780 million, according to a joint press release from two oil and gas services companies late Monday. Natco shareholders will get 1.185 shares of Cameron's common stock for each of Natco's 20.3 million outstanding shares. The boards of both companies have unanimously approved the deal, which is expected to close during the third quarter. When the deal is completed, Natco will own about 10% of Cameron's outstanding common shares.

Global consumer confidence is stabilizing after falling for 18 months, providing a glimmer of hope for a shattered world economy in which three quarters of households cut spending, a survey showed on Tuesday.
Some 40 percent of consumers blame the banking and finance industry for the worst economic downturn since the Great Depression, while 19 percent also hold former U.S. President George W. Bush's administration and their own governments responsible, the Ipsos/Reuters poll of 23 countries found.
The survey of 23,000 people, conducted between April 14 and May 7, showed 29 percent thought that the economic situation in their country is very good or somewhat good, only a slight dip from 31 percent in November 2008, but well down on 43 percent in April 2008 and 54 percent in October 2007

The bulk of China’s total international investment position is held in US dollar assets and only 6 per cent is in the form of direct investment.

"A few months ago, the U.S. was in the throes of the most severe recession since the 1930s," said Paul Ashworth, a senior economist at Capital Economics. "We've had some improvement, but . . . we're still nowhere near a meaningful recovery or even a slight recovery."

The dollar depreciated to $1.4281 per euro as of 7:57 a.m. in New York, the lowest level since Dec. 29, from $1.4159 yesterday. It fell to 95.42 yen, from 96.59. The yen strengthened to 136.15 per euro, from 136.78 yesterday. The pound advanced to $1.65 for the first time since Oct. 30, before trading at $1.6489, from $1.6443.
Medvedev may discuss his proposal to create a new world currency when he meets his counterparts from Brazil, India and China this month, Natalya Timakova, a spokeswoman for the presdident, told reporters by phone today. Medvedev first proposed seeking alternatives to the U.S. dollar as a reserve currency in March.

"The reality is the Fed is totally out of control here and it's causing all kinds of unintended consequences as a result or this monetization of US debt and the debasement of the US dollar," says Mike Larson, analyst at Weiss Research. "The market's going to extract it's pound of flesh somewhere--whether that's the currency market, the bond market, or if it's some sort of tag-team."

Dollar General Corp. said Tuesday that its first-quarter profit surged to $83 million from $5.9 million a year earlier. Sales rose 16% to $2.78 billion with same-store sales climbing 13%, helped by higher customer traffic and average transaction.

The dollar index at 78.45, which measures the performance of the greenback against a basket of global currencies, declined for a fourth straight session. Gold for June delivery rose $3.60, or 0.4%, to $982.20 an ounce in early North American electronic trading. The more active August contract also rose, up 0.4% to $983.50 an ounce.

The National Association of Realtors said sales climbed 2.9 percent to an annual rate of 4.68 million, but applications for home loans fell to their lowest level since early March last week as mortgage costs rose.
Multi-family units -- the hardest-hit sector -- jumped 6.4 percent to a 500,000-unit annual pace. Sales were up in three of four regions. However, the number of unsold homes swelled 8.8 percent to 3.97 million, the highest since November. At the current sales pace, it would take 10.2 months to clear that supply.
The median home price fell 15.4 percent from a year ago to $170,200 in April, the second biggest percentage decline on record. The Realtors group blamed distressed sales, which accounted for 45 percent of all transactions, for depressing prices.
A separate home price measure from the Federal Housing Finance Agency showed prices fell 7.3 percent over the 12 months through March, contrasting with an 18.7 percent drop seen in the Standard & Poor's/Case-Shiller survey Tuesday.

Ford Motor Co. said Tuesday that total U.S. May sales fell 24.2% to 161,531 vehicles from 213,238 a year ago. General Motors Corp. on Tuesday reported a 29% drop in May U.S. light vehicle sales. Toyota Motor Corp.said Tuesday that May U.S. sales declined 40.7% to 152,583 vehicles from 257,406 a year ago. There were 26 selling days this past May compared with 27 days in May 2008. Bankrupt automaker Chrysler said Tuesday that U.S. May sales dropped 47% to 79,010 vehicles from 148,747 a year ago.

The Obama administration is warning lawmakers that the trust fund that pays for highway construction will go broke in August unless Congress approves an infusion of as much as $7 billion.
Sen. Barbara Boxer, chairman of the Senate Environment and Public Works Committee, said at a hearing the administration has told senators the Federal Highway Trust Fund will need an estimated $5 billion to $7 billion to keep current construction projects going.
The California Democrat said another $8 billion to $10 billion will be needed to keep the fund solvent through the year ending Sept. 30.

The S&P 500 added nearly 2 points, or 0.2%, to 944.7 by the close of trading. The Dow Jones Industrial Average advanced 19 points, or 0.2%, to 8,740.9. And the Nasdaq Composite gained 8 points, or 0.4%, to 1,836.8.

GM

6/1/09 GM

Dwight David Eisenhower: “Unlike presidential administrations, problems rarely have terminal dates.”

Senior officials in the Obama administration said Sunday the U.S. government will provide $30 billion in financing to General Motors Corp. to allow it to continue to operate through a historic Chapter 11 bankruptcy proceeding that will last an estimated 60 to 90 days.

A U.S. bankruptcy judge on Sunday approved the sale of substantially all of U.S. automaker Chrysler's assets to a group led by Italy's Fiat SpA. Judge Arthur Gonzalez approved the $2 billion sale of the assets to a new company that will be 68 percent controlled by a healthcare trust aligned with the United Auto Workers union.

John Hussman: "You simply cannot have an economy lend out trillions of dollars in bad debt, and then make the lenders whole with public funds (while still facing a massive second wave of probable mortgage defaults) without destructive repercussions....For our part, the average return-to-risk profile of the market, given current conditions, does not justify much risk taking. Moreover, in view of the larger picture of economic and credit conditions, the risks are lined up clearly to the downside. The stock market features unimpressive valuation, overbought conditions, and a reliance on positive surprises and easing risk aversion. That sort of market certainly can continue higher, but the potential for further return comes with a great deal of potential risk."

Peter Cooper: "Around 40,000 jobs will go as an immediate consequence of the bankruptcy of General Motors due to be announced by President Obama tomorrow: 30,000 across the United States and another 10,000 in the connected sale of GM’s European operations....The 40,000 job losses are just the opening shot of the consequences of the GM insolvency. There will be secondary rounds as suppliers and subcontractors fail. Nothing can make up for the consequences of the massive collapse in GM auto sales this year."

According to Bloomberg, the dollar fell after a report showed China’s economy, the world’s third-largest, may be recovering from its deepest slump in almost a decade, sparking demand for commodities and higher-yielding assets.
The Russian ruble rose to its strongest level since January as manufacturing in China expanded for a third month. The dollar weakened against all but one of the 16 most-traded currencies, led by a 1.6 percent drop against the Norwegian krone and a 1.5 percent decline versus the Australian dollar.

Mike Shedlock: "Think that leverage is coming back? I don't. The Effect of Household Deleveraging on Housing, Consumption and the Stock Market is going to be far greater than most realize. This bubble will not be reblown, just as the Nasdaq bubble was not reblown after the tech crash.
Peak Credit and her twin sister Peak Earnings have arrived....There Are $2.4 Trillion of Alt-A Mortgages and Their Resets Are Mostly Ahead of Us....24% of Homeowners With a Mortgage Owe More Than the Home Is Worth, Making Them Far More Likely to Default....The dip in initial claims from the March peak of roughly 650,000 is not accelerating very fast, if indeed at all. Those looking for a recovery in jobs soon are going to be disappointed. Economists expect to see unemployment by 10% at the end of the year. I expect to see it at 9.8%+- by August and approaching 11% by the end of the year. Bear in mind the "stress-free tests" conducted by the Fed had an adverse scenario of 10.3% at the end of 2010.....The Alt-A and Option ARM defaults are going to be massive.
Think this leads to inflation? Think again."

Core prices - which exclude food and energy prices - rose 0.3%. The U.S. personal savings rate jumped to a 14-year high of 5.7% in April. Real consumer spending fell 0.1%, the second consecutive decline and the 8th decline in the past 11 months.

June gold rose $5.90, or 0.6%, to $984.70 an ounce. Oil topped $68.

World Bank President Robert Zoellick warned policy makers that fiscal-stimulus plans are insufficient to turn around the “real economy” and rising joblessness threatens to set off political unrest across the globe.
“While the stimulus has given an impulse, it’s like a sugar high unless you eventually get the credit system working,” Zoellick said in an interview yesterday with Bloomberg Television’s “Political Capital with Al Hunt.” “When unemployment increases, that’s probably the most political combustible issue.”

Elizabeth Wurtzel: "I wonder if any of them can tell from just looking at me that all I am is the sum total of my pain, a raw woundedness so extreme that it might be terminal. It might be terminal velocity, the speed of the sound of a girl falling down to a place from where she can't be retrieved. What if I am stuck down here for good?" I wonder if she is talking about the auto shareholders and bond holders, auto dealers, auto parts companies, and the taxpayers? Clearly, she is not referring to bankruptcy lawyers.

Cisco to replace GM in DJIA. Travelers to replace Citigroup in DJIA.

Auto-parts supplier Lear Corp.said Monday that it has chosen not to make semi-annual interest payments of about $38 million due Monday with respect to its 8.50% senior notes due in 2013 and 8.75% senior notes due in 2016. Instead, the company said it's utilizing the 30-day grace period applicable to the interest payments while it continues discussions regarding a capital restructuring with its lenders and others. Under the terms of the debt, the use of the grace period does not constitute a default, Lear said.

The dollar index, stood at 78.851, down from near 79.226 in late North American trading on Friday. The euro rose to $1.4200, its highest level against the dollar since December, up from $1.4156 late Friday. The dollar index has returned to the level last seen in January.

Over the past three decades GM's U.S. workforce has fallen from a high of 620,000 in 1979 to about 120,000 now.
The company already has plans to temporarily shut 13 plants to reduce inventories, affecting about 25,000 GM workers and a comparable number who work for suppliers.
The statistical treatment of those workers, which determines when and where they show up in unemployment data, is complicated.
Furloughed workers show up in weekly jobless claims data, but won't be counted in the monthly payroll survey. Because they remain on the payroll while they receive severance payments, the company will report them as employed. However, they may show up in the unemployment figures, which are based on a separate survey of households.

Art Cashin: "Just because you know something's going to happen doesn't mean you should be calm about it: 'Gee, I see that iceberg. Wow, we just hit it. I think that means the ship's going to sink.'"
"We need to fund a huge, huge deficit. And we need cooperation from outside [the U.S.] to do it."

"This is a very, very dangerous period we're going through."



Soybeans jumped to an eight-month high and corn climbed to more than a seven-month peak.



U.S. May ISM factory index 42.8% vs 40.1% April, the highest level since September.



Rachael Granby: "In the short-run, the estimated losses from quick bankruptcy restructurings at GM and Chrysler are 63,200 jobs this year and 179,400 jobs next year."



Ten-year note yields rose 16 basis points to 3.62%.



Private builders increased spending on housing projects by 0.7 percent, contributing to the overall improvement in April. It marked the first time since August that private home builders boosted such spending. At that time, they increased it 5.5 percent.
Private spending on all other construction projects other than residential ones went up 1.8 percent in April, following a 2.6 percent gain in March. Builders increased spending in April on projects including hotels and motels, factories, power plants and health care facilities. That more than offset reductions in spending on office buildings, amusement and recreation projects and on other projects.
Spending by the government, however, dipped 0.6 percent in April.

Lending from TARP banks went down 0.8% in March.

After climbing above $990 an ounce, gold fell 30 cents to end at $980 an ounce. Copper for July delivery rose 12 cents to finish at $2.32 a pound on the Comex division of the New York Mercantile Exchange. Crude for July delivery rose $2.27, or 3.4%, to end at $68.58 a barrel on the New York Mercantile Exchange, the highest settlement price for a front-month contract since Nov. 4.

The difference between two- and 10- year yields widened to 2.74 percentage points, approaching the record 2.76 percentage points set on May 27.
“Money is rotating out of Treasuries and into other areas,” said Thomas Roth, head of U.S. government-bond trading in New York at Dresdner Kleinwort, one of 16 primary dealers that trade with the Federal Reserve. “There has been a tremendous flight into Treasuries over the past year and if things get better we will see a flight out.”
The yield on the benchmark 10-year note rose 25 basis points, or 0.25 percentage points, to 3.72 percent at 2:40 p.m. in New York, according to BGCantor Market Data.

The Dow Jones Industrial Average gained 221 points, or 2.6%, to end at 8,721. The S&P 500 index rose 23 points, or 2.6%, to 942, while the Nasdaq Composite gained 54 points, or 3%, to 1,828.

China’s former central bank adviser Yu Yongding will meet Treasury Secretary Timothy Geithner today and tell him the U.S. shouldn’t be complacent about China continuing to buy Treasuries.
“I wish to tell the U.S. government: ‘Don’t be complacent and think there isn’t any alternative for China to buy your bills and bonds’,’’ Yu said in an interview yesterday. “The euro is an alternative. And there are lots of raw materials we can still buy.’’ Yu is scheduled to meet Geithner at the Grand Hyatt Hotel in Beijing today.

U.S. District Judge Thomas Hogan sided with the detainees' attorneys and the media, saying the public has a right to access the records.
"The issue of what to do with the detainees at Guantanamo Bay remains a source of great public interest and debate," Hogan wrote.
"Providing the public with access to the charges levied against these detainees, as detailed in the factual returns, ensures greater oversight of the detentions and these proceedings," he said. "As long as public access does not come at the expense of the litigation interests of petitioners or national security, the court believes the public has a common law right to access the returns."
The judge ordered the Justice Department to publicly file its unclassified records or request what specific information it wants to keep protected, marking the exact words with a colored highlighter, by July 29.

Counter-trend Moves

5/31/09 Counter-trend Moves

James Glassman: "In return for money G.M. owes its health trust, the auto workers’ union would get 17.5 percent of its stock, warrants to raise that share to 20 percent, along with a $2.5 billion cash payout over eight years and $6.5 billion in preferred stock paying a 9 percent dividend. I agree with bondholders who feel the union is getting at least four times as much of G.M. in return for claims that are, at best, equal to those of the creditors.
Even if the courts were to reject the plans for G.M. and Chrysler, the administration’s actions in trying to force the deals may damage the credit markets for years to come. The treatment of the bondholders is a warning to investors that the federal government won’t hesitate to push them aside in a crisis.
Perhaps it’s no coincidence that in the wake of the Chrysler deal we have seen a decline in prices for long-term Treasury bonds and a sinking dollar. "

Tim Wood: "The danger that I see with these counter-trend moves is that they have fostered false hopes. These rallies have offered people the opportunity to recoup some of their losses. But, the longer a particular market rallies the more the false hopes set in. This in turn allows the wish to begin to father the thought. It is the greed to recover the losses that will ultimately cost the average investor even more in losses. As the advance continues the greed sets in and people wish for more and more of an advance as they hope to further recoup their losses. In the end, the bear market will take the gift that is has given by these counter-trend rallies back. Yes, in the end most investors will find themselves with even larger losses than they had at the previous bottom. The greedy public does not recognize these moves as counter-trend and they will sit on their wishes as the market turns back down and their recovered losses turn into yet bigger losses. One does not have to be blindsided by the coming downturns. It is indeed possible to identify the pending downturn out of these counter-trend moves with the proper technical tools, such as the time proven intermediate-term Cycle Turn Indicator. Sound unbiased technical methods are the only way I know to navigate the ongoing financial disaster that we are dealing with. The politicians, Republican or Democrat, nor the mainstream media warned you of the previous declines because they did not know they were coming and even if they did they would not have told you. Do you really think they would tell you anything any different this time around?"

Mike Burk: "I think there were (are) too many of us looking for a correction in or an end to the recent up move so the final high will be delayed.
I expect the major indices to be higher on Friday June 5 than they were on Friday May 29."

Weatherford International, based in Switzerland with major operations in Houston, has agreed to give TNK-BP $450 million to $490 million in stock for the Russian company’s oil field services division, both companies announced Friday.

In the deal, Weatherford will give TNK-BP 24.3 million shares of common stock for more than 75 drilling rigs, 180 workover rigs, 7,000 employees and other equipment and infrastructure in western Siberia and the Volga-Ural region southeast of Moscow.

“From a replacement value alone, this looks like an economically rational if not attractive deal,” Simmons & Company International said in a note to investors.



India will consider imposing an additional duty on steel imports and ensure all capacity expansion undertaken by state-run companies is completed in time, the newly appointed federal steel minister, Virbhadra Singh, said Friday.
"An immediate key challenge is the disparity between Indian and global steel prices consequent to the recent economic slowdown," Mr. Singh told reporters.
"The question of instituting requisite fiscal measures in the context of the Indian steel industry demand has to be immediately addressed," he added.

Bharti Wal-Mart Private Ltd., a joint venture between India's Bharti Enterprises and Wal-Mart Stores Inc., opened its first wholesale outlet called "Best Price Modern Wholesale," in Amritsar in the northern state of Punjab on Saturday.

The product of a joint development programme between IVAX Corporation and Serono, Mylinax, a proprietary oral formulation of cladribine, is a novel therapy for the treatment of multiple sclerosis (MS).
Mylinax has now entered advanced-stage development, which if successful could see the introduction of the first oral disease-modifying treatment for patients with MS.

GM wants to shed its Hummer, Saturn and Saab brands and plans to wind down the Pontiac line.

The Australian and New Zealand dollars traded near eight-month highs on concern the U.S. budget deficit will quadruple to about $1.8 trillion, prompting investors to buy currencies of commodity-exporting nations.

Loan Quality

5/30/09 Loan Quality

Floyd Norris: "“OVERALL loan quality at American banks is the worst in at least a quarter century, and the quality of loans is deteriorating at the fastest pace ever, according to statistics released this week by the Federal Deposit Insurance Corporation."

The dollar index declined 0.9% this week to 79.29 (down 2.5% y-t-d).

The CRB index jumped 3.7% (up 10.2% y-t-d). The Goldman Sachs Commodities Index (GSCI) surged 5.5% (up 26.9% y-t-d).

The Baltic Dry Index has risen for 19 consecutive days. It was only 90 days ago that I suggested the upside potential in this index.

Doug Noland: "I believe The Core to Periphery Dynamic is supportive of a more rapid than expected global economic recovery. I definitely expect global inflation to surprise on the upside. Adherents to the global deflationary spiral thesis may be left wondering what the heck happened. The backdrop seems to be set for surprising revival in energy and commodities markets. And I would not be surprised if the global equities rally has some legs.
Yet I view The Core to Periphery Dynamic as profoundly bearish for the U.S. At its core, this historic redirection of global flows and inflationary pressures is the consequence of a breakdown in the dollar standard. Failed policies, a resulting deeply impaired economic structure, and massive ongoing devaluation have ended the dollar’s reign as the globe’s premier reserve currency and perceived stable store of value. There is today no sound currency to replace the dollar, so the global financial system operates rudderless and with great uncertainties.
It is more certain, however, that the great benefits commanded to our economy and markets over the decades from governing the world’s reserve currency are drawing to an end. Our policymakers still believe they can inflate Credit and manipulate interest rates - and not have to pay a price for it. But the new global reality may be that currency markets protest massive U.S. fiscal deficits and activist monetary policy, while global markets come to dictate U.S. market yields. Over the past two weeks we have seen the dollar and U.S. Treasuries/MBS come under significant pressure. Is this the beginning of global markets disciplining Washington?
A robust Core to Periphery Dynamic and the re-emergence of dollar vulnerability are a potent combination. U.S. markets to this point remain sanguine with the prospect of an expanding Federal Reserve balance sheet rectifying any spike in interest rates. But currency markets are no doubt increasingly fixated on our propensity to monetize current and prospective stimulus. At some point, increasingly unwieldy flows out of our currency may force the Fed’s hand. The scenario where the Fed is forced to choose between loose monetary policy and currency crisis sits out there as a potential big negative surprise for U.S. markets."

Daniel Aaronson and Lee Markowitz: "Today most people know that the policies of the US government's stimulus and bailout plans, not to mention Social Security and Medicare, are problematic for the US fiscal situation and US Dollar yet have not accepted that the US Dollar is a bubble. When the market fully recognizes the Dollar bubble, the outcome will prove disastrous for anyone holding US Dollars.
The losses that foreigners are suffering on their US Dollar and Treasury holdings are rapidly accumulating. Even more so, the Fed is now trapped. The Fed was hoping to hold down Treasury rates by announcing the purchase of $300 billion of Treasuries. However, Treasuries are falling despite the Fed's intervention. If the Fed increases its buying there is no telling how far the US Dollar may fall. If the Fed does not increase its purchases, Treasuries may fall even further, sending home prices spiraling downwards. When combining the Fed's precarious position with recent fears about the credit rating of the US, the unlimited downside potential of all US assets is becoming clear even to the greatest of bulls. Despite waiting for so long for these events to unfold, it now seems as if the end is near."

Jerrry Flum, Founder and CEO of Credit Risk Monitor: "So, when I look at what the President's plan is now, and what the Congress and everybody's trying to do, I am astounded by it. At the end of the day, here's what they are trying to do: we've got the American consumer, with no savings and who has, for the most part, been wiped out in real estate - because if he has a $160,000 mortgage on a house he purchased for $200,000, but is now worth $160,000, he has very little, if any, equity left in the house. And to top it all off, his 401k and his pension and everything else is down 30 to 40 percent.
So, this consumer has no savings; his assets have shrunk, and the President of the United States, and everybody, has an economic policy which, for the most part, is trying to force banks to lend money to that consumer, so he can go out and buy another TV set or another car.
It's ethically and morally bankrupt, and it's an atrocious policy for our government to try to get that person to borrow more money to consume when that person should be saving. It's insane. The fundamental policy of the government is to come in and get the banks to lend to a consumer, who represents 70 percent of the GDP, who's nearly busted... you know, sometimes I wonder if I'm on the same planet with everybody."

World Bank President Robert Zoellick warned policy makers that fiscal-stimulus plans are insufficient to turn around the “real economy” and rising joblessness threatens to set off political unrest across the globe.
“While the stimulus has given an impulse, it’s like a sugar high unless you eventually get the credit system working,” Zoellick said in an interview yesterday with Bloomberg Television’s “Political Capital with Al Hunt.” “When unemployment increases, that’s probably the most political combustible issue.”

London luxury-home prices fell about 20 percent in May from a year ago as job cuts in the financial- services industry reduced demand, Knight Frank LLP said.

About 6.7 million people were working fewer than 35 hours a week in April because of “slack work or business conditions,” nearly double the number a year earlier, according to the Bureau of Labor Statistics. A recent survey of 518 large companies by Hewitt Associates, a human resources consulting firm, found 16 percent had cut pay and 20 percent had cut hours or imposed furloughs, far more than the firm has seen in previous recessions.

The number of rigs drilling for natural gas in the United States fell by 8 this week to 703, the lowest level in 6-1/2 years, according to a report issued Friday by oil services firm Baker Hughes in Houston.
U.S. natural gas drilling rigs have been in a steady decline since peaking above 1,600 in September, and now stand at about 776 below the same week last year, at the lowest level since November 2002, when there were 695 gas rigs operating.

Zman Energy Brain: "The Administration has imposed a 1 year moratorium on building roads on 58 million acres of U.S. national forest land. The edict takes effect immediately and supercedes any State laws passed regarding road building. These roads are used for logging, mining and um, drilling, etc. So if you have a federal less in BFE National Park and no road, good luck to you, I’m guessing you’re not going to be getting an extension. "

According to the FT, the European arm of General Motors will be shielded from the expected insolvency of the US group after an 11th hour deal reached on Saturday morning that will see Magna International, the Canadian parts supplier, take over the business with financial backing from the German government.
After a day of drama following Fiat’s withdrawal from talks with Berlin, GM and the US Treasury to acquire the operations, which include the Opel and Vauxhall brands, exhausted negotiators announced the breakthrough at shortly after 2 am, after six hours of talks at the office of chancellor Angela Merkel.

The Dollar

5/29/09 The Dollar

GM shares more than 50 percent of about 1,500 North American suppliers with Chrysler LLC and Ford Motor Co., consultant CSM Worldwide estimates. Visteon Corp., a former Ford unit, filed for bankruptcy yesterday.

The Chicago purchasing managers index fell to 34.9 in May from 40.1 in April, according to a survey of corporate purchasing managers released Friday.

The U.S. economy contracted again in the first quarter, falling at a revised 5.7% annual rate after sinking 6.3% in the fourth quarter, the Commerce Department reported Friday in its second estimate of quarterly gross domestic product. Business investment declined at a record rate during the quarter. Investments in housing fell at the fastest pace in 29 years. Domestic demand fell at the fastest rate in 29 years. Exports fell at the fastest pace in 38 years. The negative 5.7% estimate for real seasonally adjusted gross domestic product was slightly stronger than the first estimate of a 6.1% decline released a month ago.

The average U.S. retail gasoline price rose 2 cents to $2.47 a gallon on Friday, according to the AAA Daily Fuel Gauge report. A week ago, gasoline sold for $2.39 a gallon. A month ago, it sold for $2.05 a gallon. A year ago, gasoline gost $3.95 a gallon, close to the all-time record of $4.11 a gallon last July.

In morning trading in New York, the dollar index, a gauge of the U.S. currency's performance against six major currencies, fell 1.4 percent to 79.415, having earlier hit 79.403, its lowest since mid December. It is now down more than 6 percent for the month, on track for its biggest monthly fall since 1985.
The euro struck its highest level this year against the dollar at $1.4134, according to Reuters data, before paring gains to $1.4095, still up 1.15 percent on the day.
The dollar fell 1.3 percent to 95.63 yen, due partly to selling by Japanese exporters, but was well above a two-month trough of 93.85 yen marked last week.


June gold rose $12.60, or 1.3%, to $974.10 an ounce on the Comex division of the New York Mercantile Exchange. Meanwhile, July silver rose 31 cents, or 2%, to $15.47 an ounce.

Yellow pages and commercial search provider R.H. Donnelley Corp. said Friday that it has filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code.

Mine operator Foundation Coal Holdings Inc. on Friday said its Central Appalachian affiliates are slashing production levels to meet current demand and laying off 60 workers.

Q1 personal consumption was revised from a 2.2% increase to a 1.5% increase; it was expected to show a 2.0% increase. Core personal consumption expenditures increased 1.5%, as expected.

The Oil Drum: "Continental shelves beneath the retreating polar ice caps of the Arctic may hold almost double the amount of oil previously found in the region, scientists say.
In new findings, the U.S. Geological Survey estimates the Arctic may be home to 30 percent of the planet's undiscovered natural gas reserves and 13 percent of its undiscovered oil."

Randall Forsyth: "While mortgage investors previously had bought non-callable Treasuries to offset the risk of their mortgages, mortgage investors have unwound that hedge, selling their Treasuries.
This sounds like so much inside baseball but it amounts to huge sums. According to an estimate by mortgage-securities-market veteran Alan Boyce, writing for Drobny Global Advisors, these hedge sales are equivalent to issuance of $1.1 trillion (with a "T") of 10-year Treasury notes, compared to expected sales of $250 billion of that maturity this year.

Clearly, Treasuries were in a bubble when they yielded just 3% for 10 years. Technical factors have nearly doubled that yield from the lows, but not fundamentals -- which still reflect a recessionary economy and debt deflation. As a result, Treasuries are back to fair value for these conditions."



California state employees would lose 5 percent of their pay under the latest proposal by Gov. Arnold Schwarzenegger to help close a widening budget deficit, his spokesman said Thursday.



Current prices are about half of what it costs California dairy producers to feed and milk their herds; every carton sold in the supermarket represents a loss on the farm. Farmers are staying afloat by getting loans secured by every cow, tractor and acre they own. But experts say that if milk prices don't rise in the coming months, many farmers will burn through their cash and go out of business.
"This is an unbelievable career wreck. The amount of wealth being destroyed in this industry every week is just mind-boggling," said Geoffrey Vanden Heuvel, who owns dairies in Chino and Corona. "The emotional toll this is taking is just amazing."

For the week ended May 27, according to AMG Data Services,
Equity Fund Inflows $1.4 Bil; Taxable Bond Fund Inflows $3.7 Bil
xETFs - Equity Fund Inflows $311 Mil; Taxable Bond Fund Inflows $2.5 Bil

Benchmark crude for July delivery was up 67 cents to $65.75 a barrel by late morning in Europe in electronic trading on the New York Mercantile Exchange.

Brazilian state-run energy giant Petrobras and China Petroleum & Chemical Corp. are in talks to explore oil and natural gas concessions off the coast of Brazil, Petrobras' exploration director said Thursday.

Bill Bonner: "The money supply – M1 – grew at an 18% rate over the last 6 months. But taking just the last 3 months, the rate of growth has fallen to only 1.8%."

U.S. consumer sentiment rose in May, but remained at relatively low levels, according to media reports of a survey released Friday by the University of Michigan and Reuters. The consumer sentiment index rose to 68.7 from 65.1 in April. In mid-May the estimate was 67.9. Economists were looking for a final May result of 68. The index hit a 28-year low of 55.3 in November, and has averaged 88.2 over the last 10 years.

General Motors Corp. shares fell 22 cents to 87 cents on Friday, hitting a low not seen since 1933 ahead of the automaker's expected bankruptcy filing on Monday.

Some UAE banks are seeing up to 2,500 customers leave the country every month without paying off their credit card bills, a number that could rise in June, a senior RAK Bank official said on Sunday.

Fitch Ratings said late Friday it lowered its ratings outlook on the State of California to negative from stable.

the Dow Jones Industrial Average gained 96 points, or 1.1%, to end at 8,500. The S&P 500 index rose 12 points, or 1.4%, to 919, while the Nasdaq Composite rose 22 points, or 1.3%, to 1,774. For the week, the Dow gained 2.7%, the S&P rose 3.6%, and the Nasdaq gained 4.9%. For the month, the Dow rose 4%, the S&P gained 5.3%, and the Nasdaq rose 3.3%.

Crude oil for July delivery ended up $1.23 at $66.31 a barrel on the New York Mercantile Exchange. It's the highest settlement price for a front-month contract since Nov. 4. In May, oil futures soared 30%, the biggest monthly gain since March 1999.

Silver futures gained 3% Friday, ending the month with their biggest monthly gain in 22 years as inflation worries and hopes for an economic recovery boosted the metal. Gold rose to three-month highs as the dollar slipped. Silver for July delivery, the most active contract, gained 45 cents to end at $15.61 an ounce on the Comex division of the New York Mercantile Exchange. The front-month June contract closed at $15.60 an ounce. Meanwhile, gold for June delivery rose $17.30, or 1.8%, to close at $978.80 an ounce, the highest settlement since Feb. 23. Silver has gained 26.6% this month, the biggest since April 1987. Gold has gained 9.8% in the month, the biggest monthly gain since November.

Safety

5/28/09 Safety

Oil ministers from the 13-nation Organization of Petroleum Exporting Countries agreed in Vienna Thursday to leave output quotas unchanged, news reports said.

Costco Wholesale Corp reported that fiscal third-quarter earnings fell 29% on 4.8% lower net sales and 7% lower comparable-store sales. For the quarter ended May 10, Costco earned $209.6 million, or 48 cents a share, compared with $295.1 million, or 67 cents, in the year-earlier quarter. Net sales fell to $15.48 billion from $16.26 billion. Shoppers stuck to buying basics like food and medicine, and pared back discretionary purchases of clothes or jewelry.

The number of new layoffs declined by 13,000 to 623,000 last week, while the number of people collecting state unemployment benefits rose by 110,000 to a record 6.79 million, the Labor Department reported Thursday. The insured unemployment rate - the proportion of insured workers who are collecting benefits - rose a tenth to 5.1%, the highest since December 1982.

Orders for U.S.-made durable goods jumped in April, rising 1.9 on stronger demand for vehicles, steel and communications equipment, the Commerce Department reported Thursday. Excluding the 5.4% increase in transportation goods, orders rose 0.8%. The gain was tempered somewhat by a large revision to March. Orders in March fell a revised 2.1%, more than double the prior estimate of a 0.8% decline.

Shipments of manufactured durable goods in April, down nine consecutive months, decreased $0.3 billion or 0.2 percent to $174.2 billion. This was the longest streak of consecutive monthly decreases since the series was first published on a NAICS basis in 1992 and followed a 1.9 percent March decrease. Machinery, down four consecutive months, had the largest decrease, $0.7 billion or 3.1 percent to $23.0 billion.

Unfilled orders for manufactured durable goods in April, down seven consecutive months, decreased $8.9 billion or 1.2 percent to $748.9 billion. This followed a 1.7 percent March decrease. Transportation equipment, down seven consecutive months, had the largest decrease, $4.9 billion or 1.1 percent to $438.8 billion.

The Commerce Department said home sales rose 0.3 percent to a 352,000 annual pace, from a downwardly revised 351,000 in March. March sales were revised to show a 3 percent decline, which had been reported as a 0.6 percent slide. The median sales price in April fell 14.9 percent to $209,700 from a year earlier, the department said. The inventory of homes available for sale in April fell 4.2 percent to 297,000, the lowest level since May 2001. April's sales pace left the supply of homes available for sale at 10.1 months' worth, the lowest since a matching reading in July.

George Ure: "If you're in the USA the bank bailouts alone have cost you $649.92 per person so far. And, it's costing your kids that much each, such that the banksters have held up the average 2.59 person household for $1,683.29 in aid till now."

For fiscal 2010, Heinz forecast earnings in the range of $2.60 to $2.70 a share.Heinz also raised its quarterly dividend to 42 cents from 41.5 cents.

The average 30-year fixed mortgage rate rose to 5.45% from 5.24% a week ago, according to Bankrate.com's weekly national survey released Thursday. The average 15-year fixed-rate mortgage also increased to 4.86% from 4.74%, while the average jumbo 30-year fixed rate rebounded to 6.60%.

Big Lots raised its fiscal 2009 earnings per share guidance to a range of $1.85 to $1.95.

Auto parts makers Visteon Corp and Metaldyne Corp filed for Chapter 11 bankruptcy protection for their U.S. operations, becoming the latest casualties of the global auto industry crisis.

According to The Wall Street Journal, server sales in the first quarter were abysmal. “Worldwide server revenue fell 24.5% during the quarter, which is the biggest annual percentage drop since IDC began tracking server sales in 1996.

The U.S. will sell $3.25 trillion of Treasuries in the fiscal year ending Sept. 30 to fund bank bailouts, stimulus spending and a record budget deficit, according to Goldman Sachs Group Inc. Today, the Treasury will auction $26 billion of seven-year notes.

The average family with health insurance shells out an extra $1,000 a year in premiums to pay for health care for the uninsured, a new report finds.
And the average individual with private coverage pays an extra $370 a year because of the cost-shifting, which happens when someone without medical insurance gets care at an emergency room or elsewhere and then doesn't pay.
The report was being released Thursday by advocacy group Families USA, which said the findings — which it calls a "hidden tax" — support its goal of extending coverage to all the 50 million Americans who are now uninsured.

A U.S. government plan to rid banks of bad loans is stalling and may soon be put on hold, the Wall Street Journal reported on Wednesday, citing people familiar with the matter.

IBD Editorial: "Compliance costs from thousands of regulations — pouring out from over 60 departments, agencies and commissions — amounted to $1.17 trillion in 2008. The federal government spends an additional $49.1 billion just to administer and enforce its rules. This figure is on par with federal income tax revenue ($1.2 trillion) and Canada's entire 2006 GDP ($1.265 trillion)."

Rigzone: "The bigger problem for Russia, however, is the prospect of falling gas demand in Europe coupled with surging global liquefied natural gas (LNG) supplies and Europe's desire to insulate itself from winter fuel disruptions. According to Bernard Reutersberg, CEO of E.ON Ruhrgas AG (EO-N-AS), "The days of high growth rates for European gas consumption are surely over." This is bad news for OAO Gazprom (OGZPY-RK), the Russian gas export monopoly. Gazprom is Russia's largest company and its export revenues account for about a tenth of the country's gross domestic product. Last year Gazprom boasted of boosting its share of the European gas market to 33% by 2015 from its current 25% stake. With a falling gas consumption outlook and increased gas competition, that boast could prove hollow."

Australia's government ordered 10 million doses of swine flu vaccine being developed by pharmaceutical company CSL Ltd.

The Procter & Gamble Co.on Thursday said it expects 2010 earnings of $3.65 to $3.80 a share, up from the midpoint of its year-ago target of $3.65 a share. Wall Street analysts expect the Cincinnati consumer products giant to earn $3.92 a share, according to a survey by FactSet Research. P&G expects 2010 organic sales growth of 1% to 3%, driven primarily by market share growth.

Revlon to cut 400 jobs.

In the first quarter of 2009, Chinese brands boosted their China market share to 30%, from 26% during the same period in 2008.

Robert Prechter: "My position is that the dollar is the most inflated currency in the world, so it has the furthest to deflate. In other words, because it is so sick, it is the currency most likely to rise during the deflationary period as dollar-denominated IOUs collapse. Regardless, my currency mix includes what I consider to be very safe foreign debt and some gold. You have to realize that almost everyone loses in a deflation. The key is to lose a lot less than everyone else. Market opinions are one thing; safety is another."

Terms of the revised bondholder deal appear in a just-filed 8-K. Bondholders will be given 10% of the "new GM" (and warrants for another 15%). Treasury gets 72.5%. New VEBA gets 17.5%. An "unofficial committee of unsecured GM Noteholders" and other large investors holding 20% of bond debt support the new proposal. New GM would have $17B in debt, including $8B owed to Treasury.

A person briefed on General Motors Corp.'s plans says the company on Monday will identify the 14 factories it will close as it heads toward a likely Chapter 11 bankruptcy protection filing. About 21,000 jobs will be lost.

1.37% of all first mortgages in the U.S. entered foreclosure proceedings in Q1, a record jump from 1.08% in Q4 and the highest level on record. Mortgage delinquencies leaped to 9.12%, also a record. Total loans in foreclosure process also struck a new high of 3.85% from 3.3% in Q4. An industry report shows that a record 12 percent of homeowners with a mortgage are behind on their payments or in foreclosure as the housing crisis spreads to borrowers with good credit.

Prices for whole chicken, for example, rose 6 percent from a year ago but prices for boneless breasts were 5 percent lower.
Sanderson Farms added that demand for chicken has been strong at grocery stores. The downturn, though, has led to lower demand away from home as more consumers dine in to save cash.

By 2013, China is expected to receive about 500,000 barrels/day of oil from Kuwait, substantially more than current imports of about 100,000 barrels/day.

Worldwide chip sales are expected to fall 22.4% to $198 billion in 2009, according to the latest estimates by Gartner Inc.

General Motors Corp. will file for Chapter 11 bankruptcy protection on June 1, Bloomberg News reported Thursday on its Web site, citing people close to the matter.

Zman Energy Brain: "Minimum royalty would be increased 50% to 18.75%. This would be applied to new and existing leases.
RIK (royalty in kind) payments would be ended. RIK allowed companies to pay a portion of their royalties to the Feds in the form of actual barrels.

Federal lease holding times (the time you have until you have to drill it up and get it under production) would be halved from 10 to 5 years.

The Obama Administration added a clause to existing leases, adding a charge of $4 per acre on non-producing leases and rising to $10 per acre in year ten. These are leases that energy companies already bid on and paid money to the federal government for. Technically, the Feds are not just throwing out the old contract in favor of a new one, they are amending the old one.

ZComment: Speechless. Ok, not quite. So, the idea here is to jack up the cost of production and rush decisions on things like deepwater developments. The administration has said it does not believe raising royalty rates will have a significant impact on U.S. production. Does it think this is going to increase production? Setting aside the increased royalty burden for a moment, the acreage charge is, for lack of a better word, bogus. E&Ps and Majors hold large portfolios of leases in the Gulf of Mexico. The decision to drill or not drill a lease depends on a variety of factors including oil and gas prices and service costs as well as science. The companies know that not all of their leases will get drilled but again, it is a portfolio and not all items in a portfolio are going to be winners. These leases often go at the Federal lease sales for millions of dollars, sometimes 10s of millions for a contested block. For the government to simply come along and change the deal now, when times are tight, only reduces the ability of the companies to invest in oil and gas projects. To the government, I can only say "Good luck at the next lease sale."
Crude inventories dropped 5.4 million barrels in the week ended May 22, declining for a third straight week, the Energy Information Administration reported. Gasoline inventories fell by 600,000 barrels last week and distillate stockpiles, which include heating oil and diesel, rose 300,000 barrels, the EIA said.



U.S. natural gas inventories rose 106 billion cubic feet in the week ended May 22, the Energy Information Administration reported Thursday. Analysts surveyed by Platts had expected an increase between 108 billion cubic feet and 113 billion cubic feet. After the data, July natural gas futures rose 32 cents to $3.96 and UNG rose $1.19 cents to $14.91.

In addition, the UNG July 15 calls traded more than 13,000 contracts at $1.43 and this was more then double the outstanding contracts at the beginning of the trading session.

Asia’s third-largest economy expanded 5 percent in the three months to March 31 after a 5.3 percent gain in the previous quarter, according to the median forecast of 24 economists in a Bloomberg survey.

The S&P 500 gained 14 points, or 1.5%, to 906.8. The Dow Jones Industrial Average advanced 104 points, or 1.3%, to 8,404. The Nasdaq Composite rose 21 points, or 1.2%, to 1,752.

Dell Inc. said Thursday afternoon that earnings plunged 63% on a sharp drop in PC sales, as well as restructuring charges. Revenue slipped 23% to $12.3 billion.

The Yield Curve

5/27/09 The Yield Curve

Costco to begin accepting food stamps. "In the past, we have not been convinced that there was sufficient demand among our membership to justify the expense and possible inefficiencies associated with accepting food stamps. However, we are mindful that many of our fellow citizens are facing unprecedented economic challenges at this time, and it seemed to us that it was worth reconsidering our position in that light."

Federal tax revenue plunged $138 billion, or 34%, in April vs. a year ago — the biggest April drop since 1981, a study released Tuesday by the American Institute for Economic Research says.
When the economy slumps, so does tax revenue, and this recession has been no different, says Kerry Lynch, senior fellow at the AIER and author of the study. "It illustrates how severe the recession has been."


Brett Steenbarger: "Monday, we saw Demand--an index of the number of stocks closing above the volatility envelopes surrounding their short-term moving averages--exceed 190, while Supply (an index of those closing below their envelopes) was only 19.
Going back to late 2002, when I first began collecting these data, we've only had 31 days in which Demand has exceeded 180. That typically occurs after breakout moves, when many stocks display favorable upside momentum.
Interestingly, returns over the subsequent five days in the S&P 500 Index (SPY) have not been favorable. The average five-day change following a big upside momentum day has been -.82% (14 up, 17 down). Nor have returns been favorable 1-4 days out.
It appears that there has been no short-term bullish edge following large upside momentum days, with profit taking not uncommon."

Market Tells: "Three weeks ago, on May 4th, the S&P was trading at virtually the same level as it is now and new 20-day highs outnumbered new 20-day lows by over 2,500. One week ago, with the S&P again at a similar level, that difference had narrowed to 649. Today, with the S&P once again back in the 910 area, the difference between new 20-day highs and lows has narrowed to 542. We’re still seeing a plurality of new highs over new lows, but the rally is not nearly as broad-based as it was three weeks ago."

Rob Hanna: "The market moved from the low end of its recent range to the high end on Tuesday. It’s quite rare for the S&P to close at a 5-day low one day and a 10-day high the next. A negative bias seems to follow such occurrences over the 1-5 days. "

Since reaching a low in early March, the Dow has gained more than 29 percent and the S&P 500 has risen nearly 35 percent.

Barry Ritholtz: "According to a survey of business economists, the recession in the U.S. “will probably end in the third quarter.”
Of course, these are the same folks who said there would not be a recession. Given their track record and ill informed opinions, we can safely ignore the noise that passes for their analysis. In its place, lets use a variety of readily available metrics that will provide a more objective measure.
Let’s look at the Conference Board’s Leading Economic Indicators, the ECRI LEIs, and the Ratio of Coincident to Lagging Indicators. They imply sometime in the first half of 2010."
In sum, the worst being over is one thing. A recovery is quite another. With salaries stuck in the mud, few job offerings in sight, inflation on the rise, interest rates trending higher, and the dollar's purchasing power in question, a recovery is far from a sure thing. In addition,
the 77 million Baby Boomers — those born in 1946 through 1964 — will start tapping their federal retirement benefits soon, which means increased government outlays for Social Security and Medicare.

Sterling rose above $1.60 for the first time in nearly seven months on Wednesday after Britain’s service sector companies revealed improving sentiment, while mortgage approvals crept higher.

Gov. Arnold Schwarzenegger recommends eliminating welfare for families and terminating health coverage for children.

About 37 percent of Target's revenue comes from necessities like paper towels and food. For Wal-Mart, that figure is about 60 percent.

The United States could have fighting forces in Iraq and Afghanistan for a decade, the top Army officer said, even though a signed agreement requires all U.S. forces to be out of Iraq by 2012.

Retail gasoline prices jump more than a dime over the last week in California and nationwide as oil rises. In early trading, oil futures rose 69 cents to $63.14, its highest level in about six months.

John Taylor: "Under President Barack Obama’s budget plan, the federal debt is exploding. To be precise, it is rising – and will continue to rise – much faster than gross domestic product, a measure of America’s ability to service it. The federal debt was equivalent to 41 per cent of GDP at the end of 2008; the Congressional Budget Office projects it will increase to 82 per cent of GDP in 10 years. With no change in policy, it could hit 100 per cent of GDP in just another five years."

Martin Hutchinson: "There's good reason for rational investors to do so. Britain's debt is forecast by S&P to exceed 100% of Gross Domestic Product (GDP) by 2013, Japan's debt may exceed a lofty 200% of GDP by 2011 and nobody believes the official forecast that U.S. government debt will remain as low as 80% of GDP by the end of the current budget horizon in 2019. Yet in all three countries, interest rates on government debt are barely above the immediate rate of inflation, let alone the rate of inflation that is likely to arrive in the next 12 to 18 months as monetary "stimulus" works its magic. Face it, if governments were companies, you wouldn't touch their stock with a 10-foot pole....Most government debt markets (including some but probably not all of those in euros) are thus likely to suffer an oversupply crisis over the next year or so. Funding requirements of the order of 10% of GDP have not been common in the past, except during major wars when the private sector more or less shuts down except for war production and the government takes emergency powers to commandeer resources. A situation in which governments in several of the world's largest economies are tapping their bond markets simultaneously at this level has not occurred since World War II, and was impossible before that, when the world was on a Gold Standard....The theory that the People's Bank of China, the Bank of Japan and the various Middle Eastern central banks will buy more of this rubbish in order to protect their existing holdings will at some stage become false, and that refutation will probably happen suddenly. Prices will collapse, and further long-term funding will become impossible. Bonds of OECD governments will have ceased to be a risk-free asset. "

Economist Nouriel Roubini on Wednesday said the end of the global recession is likely to occur at the end of the year rather than the middle, and that U.S. growth will remain below potential afterwards.

"We are not yet at the bottom of the U.S. and the global recession," said Roubini. "The contraction is still occurring and the recession is going to be over more toward the end of the year rather than in the middle of the year."

"There is still too much optimism that a recovery is just around the corner," said Roubini, a professor at New York University's Stern School of Business and chairman of RGE Monitor, an independent economic research firm.



The highest home loan rates in more than two months drained demand for refinancing last week, dragging total U.S. mortgage applications to the lowest level since early March, the Mortgage Bankers Association said on Wednesday.

The average 30-year mortgage rate rose 0.12 percentage point to 4.81 percent, above a low of 4.61 percent two months ago though down more than a percentage point from a year ago.



Bradford & Bingley Plc, the U.K. mortgage lender taken over by the government, said it won’t make interest payments on 325 million pounds ($520 million) of subordinated bonds.
The bank will skip payments due in either June or July on 50 million pounds of 11.625 percent perpetual securities, 125 million pounds of 6.625 percent bonds maturing 2023 and 150 million pounds of floating-rate notes due 2054, according to three separate statements sent after the market closed yesterday.

The U.S. economy will enter “hyperinflation” approaching the levels in Zimbabwe because the Federal Reserve will be reluctant to raise interest rates, investor Marc Faber said.

Richard Fisher, president of the Dallas Federal Reserve Bank, said: "Senior officials of the Chinese government grilled me about whether or not we are going to monetise the actions of our legislature."
"I must have been asked about that a hundred times in China. I was asked at every single meeting about our purchases of Treasuries. That seemed to be the principal preoccupation of those that were invested with their surpluses mostly in the United States," he told the Wall Street Journal.

Venezuela and Bolivia are supplying Iran with uranium for its nuclear program, according to a secret Israeli government report obtained Monday by The Associated Press.

The severe recession in the manufacturing sector is expected to last much of the year before a modest recovery takes hold next year, according to the Manufacturing Alliance/MAPI, a research group funded by manufacturing companies. Only three of 27 industries are expected to grow this year: aerospace, communications equipment and medical equipment, the nonprofit organization said Wednesday. Manufacturing production is forecast to drop 12% in 2009 and rise 2% in 2010, said Daniel J. Meckstroth, chief economist for the organization. "Unfortunately, there are no quick fixes," Meckstroth said. "The deleveraging of the American consumer is ongoing and will continue for years."

The world could face within "two-to-three years" another oil price spike similar to that witnessed in 2008, Saudi Arabian Oil Minister Ali al-Naimi said on Monday.
Al-Naimi warned a meeting of Group of Eight ministers in Rome that the high-price scenario was likely unless investments in "new capacity expansion projects are made."

According to the Washington Post, a value-added tax, or VAT -- has not been seriously considered in the United States. But advocates say few other options can generate the kind of money the nation will need to avert fiscal calamity.
"There is a growing awareness of the need for fundamental tax reform," Sen. Kent Conrad (D-N.D.) said in an interview. "I think a VAT and a high-end income tax have got to be on the table."
A VAT is a tax on the transfer of goods and services that ultimately is borne by the consumer. Highly visible, it would increase the cost of just about everything, from a carton of eggs to a visit with a lawyer. It is also hugely regressive, falling heavily on the poor. But VAT advocates say those negatives could be offset by using the proceeds to pay for health care for every American -- a tangible benefit that would be highly valuable to low-income families.

Global air passenger traffic fell 3.1% in April and cargo traffic slumped 21.7% compared to the same period a year earlier, the International Air Transport Association (IATA) said Wednesday.

Chain store sales fell 0.4% in the first three weeks of May vs. last month, Redbook says, worse than the expected 0.1% drop. Weekly sales were up 0.8% vs. last week, ICSC says, noting the Memorial Day holiday weekend "sparked some renewed consumer spending."

ABC News' consumer sentiment index lost ground for the second straight week, falling 2 points to -47. Sentiment remains at the high-end of its range for Q1, but also at a level consisent with recession. Consumers' perception of the economy remained at -84; personal finances (-8) and the buying climate (-50) inched lower.

Monsanto Co said on Wednesday that stronger-than-expected competition in the herbicide business would push fiscal-year results to the low end of its earnings forecast, and investors responded by pushing its shares down more than 4 percent.
For the year ending on Aug. 31, Monsanto, the world's largest seed company, now expects ongoing earnings of about $4.40 per share, the lowest point in its previously announced range of $4.40 to $4.50.
Monsanto said it expected third-quarter earnings of $1.15 per share. Analysts were looking for $1.58, according to Reuters Estimates.
The company also said it expected to generate about $1.4 billion in free cash for the full year.

The number of problem U.S. banks and thrifts rose to 305 in the first quarter of 2009, up 40 percent from 252 in the prior quarter, marking the highest number since 1994, the Federal Deposit Insurance Corp said on Wednesday.
“The first-quarter results are telling us that the banking industry still faces tremendous challenges,” FDIC Chairman Sheila Bair said today at a briefing in Washington. “Going forward, asset quality remains a major concern.”

Boosted by sales of foreclosed homes and incentives for first-time buyers, sales of pre-owned homes rose 2.9% to a seasonally adjusted annual rate of 4.68 million in April, a real estate trade group reported Wednesday. Salesof existing homes have been roughly unchanged for six months. Sales are rising in areas with the greatest price declines, the same cities that were at the center of the earlier housing bubble. Sales are down 3.5% in the past year and are down 35% from the peak nearly four years ago. High-end sales remain sluggish. Rex Nutting stated “sales of homes priced above $750,000 have collapsed . . . The high-end has been decimated by the inability of many homeowners to sell their home in order to trade up. Most don’t have the collateral to get a loan.”
U.S. home prices fell 1.1% in March, the Federal Housing Finance Agency reported Wednesday, and fell 7.3% in the past year. Home prices in the first quarter fell 0.5%, the government housing agency also reported. Prices fell in nine of nine regions in March.
Nationwide, the median existing-home price for all housing types was $170,200 in April, down 15.4% below April 2008. Total housing inventory at the end of April rose 8.8% — about 4 million existing homes — a 10.2. month supply.

J.P. Morgan Chase Chief Executive Jamie Dimon said on Wednesday that he expects the firm's credit card losses, excluding business acquired from Washington Mutual, to be about 9% in the next quarter.

10-year Treasury bond yields soar to 3.72% and 30-year to 4.60%.
The difference in yields between Treasury two- and 10-year notes widened to a record on concern surging sales of U.S. debt will overwhelm the Federal Reserve’s efforts to keep borrowing costs low.
The so-called yield curve steepened to 2.75 percentage points, surpassing the previous record of 2.74 percentage points set on Aug. 13, 2003.
“There’s consternation in the stock market,” said Russ Koesterich, who helps oversee $1.5 trillion as head of investment strategy at Barclays Global Investors in San Francisco. “If we see a pick-up in long-term yields, an economic recovery will be much more difficult. That concern could be enough to halt the recent stock rally.”

The head of Discover Financial Services, the fourth-largest U.S. credit card network, said he expects a rise in credit defaults in the second quarter, while loan growth is expected to slow in the second half of this year.

The recent rise in consumer and investor sentiment could be short-lived unless the economic recovery shows signs that it's real, Pimco co-CEO Mohamed El-Erian said Wednesday.

The euro-zone overnight index average rate (Eonia) hit 1.146% Wednesday, more than double a recent low of 0.486% on May 11 and above the ECB’s target rate of 1%. After languishing well under the ECB’s target rate earlier this year, the overnight rate has been rising steadily recently. If the overnight rate stays higher than the ECB’s target rate, then the ECB’s monetary policy is more restrictive than the central bank wants.

German consumer prices unexpectedly dropped in May from a year earlier, the first annual decline since at least 1996, after energy costs retreated.
Prices fell 0.1 percent when calculated using a harmonized European Union method after rising an annual 0.8 percent in April, the Federal Statistics Office in Wiesbaden said today.

Going forward, "contingent liabilities" related to Social Security and Medicare could pressure the rating, Moody's said.

The United Nations predicted Wednesday that the global economy will shrink 2.6 percent this year as a result of the world financial crisis — a considerably deeper downturn than the 0.5 percent contraction forecast in January.

The S&P 500 dropped the most in two weeks, losing 1.9 percent to 893.06 at 4:05 p.m. in New York. The Dow Jones Industrial Average sank 173.47 points, or 2.1 percent, to 8,300.02. The Nasdaq feel 1.1% or 19 points.

Crude for July delivery closed up $1, or 1.6%, at $63.45 a barrel on the New York Mercantile Exchange, the highest settlement for a front-month contract since Nov. 5.

The Monthly Leasing and Finance Index for April plunged 42.5% compared to a year ago, a new low for new business volume, the Equipment Leasing and Finance Association said Wednesday. "Tight credit and the recession continue to impede new business volume," said ELFA President Kenneth Bentsen.

Art Cashin: "I'm a little worried about one other thing," he added. "More and more stocks are beginning to slip below their 50-day moving averages. That's a sign of internal weakness."

Housing And Treasuries

5/26/09 Housing And Treasuries

10-year Treasury bonds yielding 3.55% and the 30-year Treasuries at 4.49%. The difference in yields between two- and 10-year notes reached the most since October 2003.

In early Tuesday trading, the Nymex July oil futures contract was down $1.81 in recent action at $59.86 a barrel and had traded as low as $59.53. Gold futures were also lower, with the July contract down $14.70 to trade at $944.20 an ounce.

Bill Bonner: " Despite the credit crunch, the banking freeze-up, and the economic recession, the money supply in the US as measured by M1 is actually rising at 14% per year."

General Electric Co's growth will be "harder to come by" in coming years given the prospect the global economy may grow at a slower pace once it emerges from recession, the company's chief executive said.
Jeff Immelt said he would look to shift more of GE's resources to China and other emerging markets set to play a larger role in driving economic growth as tighter credit forces the U.S. consumer to rein in spending.


Rio Tinto Ltd., the world's third-largest miner, said Tuesday it has agreed with Japan's Nippon Steel Corp. to cut its iron ore prices by more than a third for this year, foreshadowing a wider industry slump in prices.


The Oil Drum: "Supplies of liquefied natural gas from proposed plants in Australia, Papua New Guinea and Indonesia may exceed demand in the Asian region by at least 57 percent, data from Wood Mackenzie Consultants Ltd. show.
The combined capacity of some LNG projects in Papua New Guinea, Australia and Indonesia is more than 44 million metric tons while the Asia-Pacific market, led by China, requires 28 million tons a year in 2015, Noel Tomnay, Wood Mackenzie’s head of global gas and power research, said in a report yesterday. The projects are seeking approvals in 18 months, he said."


According to the WSJ, Twitter Inc. is confronting a slew of challenges -- from hiring, to keeping its service up and running, to finding meaningful revenue -- as the micro-blogging service deals with sudden stratospheric growth.
Even as Twitter's users have jumped to an estimated 32.1 million from 1.6 million a year ago, the San Francisco company has just 45 employees, up from around 21 in January, and it has brought on only a handful of people with sales or business experience.
Most of Twitter's employees have had to focus on maintaining the service, which allows people to post and read short, personal updates.

President Obama has chosen Judge Sonia Sotomayor of the Federal Appeals Court as his nominee for the Supreme Court. She once stated "I don't believe we should bend the Constitution under any circumstance. It says what it says. We should do honor to it."

North Korea has launched tests of two short-range missiles just a day after testing a nuclear bomb. Each missile has a range of about 80 miles.

JPMorgan Chase stands to reap a $29 billion windfall, thanks to an accounting rule that lets the second-biggest U.S. bank transform bad loans it purchased from Washington Mutual into income.
Wells Fargo, Bank of America and PNC Financial Services Group are also poised to benefit from taking over home lenders Wachovia, Countrywide Financial and National City, regulatory filings show.

The number of agents typically declines in a housing slump and rebounds when the market recovers. But this time, "when we see an upturn in the cycle, any recovery in the ranks of residential real estate brokers will be limited by a reduced need for their services," said Stuart Gabriel, director of UCLA's Ziman Center for Real Estate.


"The real estate brokerage industry is not going away, but the combination of efficiency gains via the Internet and the cyclical downturn will both be significant forces to their rapidly shrinking ranks," Gabriel said.
The National Assn. of Realtors reports a 13% drop in membership since 2006.

South Africa entered its
first recession in 17 years as GDP fell an annualized 6.4% in Q1.

According to the Education Trust, the U.S. is the only industrialized country in which young people are less likely than their parents to graduate from high school.

The Center for Labor Market Studies at Northeastern University in Boston: “Since unemployment cannot begin to fall until payroll growth hits about one percent — and payroll growth will not hit one percent until [gross domestic product] growth hits at least 2.5 percent to 3 percent — we may not see any substantive payroll growth until late 2010 or 2011, and unemployment could rise until that time.”

Iran has sent six warships to international waters, including the Gulf of Aden, to show its ability to confront any foreign threats, its naval commander said on Monday.
Admiral Habibollah Sayyari, quoted by the ISNA news agency, made the announcement five days after Iran said it test-fired a surface-to-surface missile with a range of 2,000 km (1,200 miles), putting Israel and U.S. bases in the area within reach.

U.S. Case-Shiller 1Q home prices down 19.1%. U.S. Case-Shiller index down 18.7% in past year. U.S. home prices down 2.2% in March according to the Case-Shiller index.
Seventeen of 20 cities saw prices fall in March, with record declines in Minneapolis, Detroit and New York. "We see no evidence that that a recovery in home prices has begun," said David Blitzer, chairman of the index committee for Standard & Poor's, which compiles the Case-Shiller index. From the peak, home prices are down 32.2%, and on average are at the same level they were at in late 2002.

Goodyear Tire & Rubber Co. on Tuesday said it will cease consumer tire production at its plant in Amiens, France, and dismiss 820 of the facility's 1,200 workers, saying it is too costly to operate.
The company said the plant will continue to produce farm tires. The reduction will be complete by the third quarter in 2010, it said.

Japanese camera maker Nikon Corp. said Tuesday it will cut 1,000 jobs to try to stem losses this year.

Sinopec said on Monday that the board has agreed to launch a subsidiary into the natural gas business, a move revealing that Sinopec is attaching more importance to the natural gas sector.
Market analysts say the subsidiary will act as a platform for Sinopec to develop its towngas and LNG business in the future.

Bill Bonner: "Not forever can the United States spend $2 for every dollar it receives in tax revenues. Not forever can the Chinese support the value of a bad investment, in which they are already too heavily invested, by buying more of it. Not forever can the dollar hold its value when the Fed is busy creating hundreds of billions more of them. And not forever can the Fed continue to inflate the currency when the dollar is falling.
Since the Fed inflates by buying bonds, when consumer price inflation begins to menace the bond market, it must deflate by selling them. When that moment approaches, even if it is months or years ahead, Daily Reckoning readers are warned: that will be a bad time to be visiting China…and a bad time to be holding U.S. Treasury bonds…and a bad time to be standing behind the dike....The US budget deficit is 13% of GDP. Sooner or later, that deficit will crush Americans too."

According to Bloomberg, Americans may have to get used to unemployment greater than 8 percent for the first time since 1983 as potential economic growth slows from 3 percent to 2 percent. Lasting shifts in consumer spending and saving may crimp profits and productivity, economists say.
Falling real-estate values and stock prices have led to the biggest decrease in household net worth on record. The loss of wealth is prompting Americans to boost savings and limit spending, one reason economists forecast a recovery from the worst recession in at least half a century will be weak.

OPEC is unlikely to cut output at its upcoming meeting, Saudi Arabia's oil minister said in comments published Tuesday, as indications mounted that the oil producing bloc would resist a temptation to tighten the taps despite wanting higher crude prices.

The Saudi minister, Ali al-Naimi, also voiced concerns about global crude stockpiles, whose tenaciously high levels are being sustained by weak demand linked to the economic meltdown.



A genetic link between gum disease (periodontitis) and heart disease has been discovered by German scientists.
The association between periodontitis and coronary heart disease (CHD) has been known for years, but a genetic link between the conditions hadn't been confirmed. The University of Kiel team found that the two diseases share a genetic variant on chromosome 9.

The Conference Board, an industry group, said on Tuesday its index of consumer attitudes jumped to 54.9 in May from a revised 40.8 in April, the biggest one-month jump since April 2003. Economists had been looking for a much smaller rise to 42.0.
Fewer Americans said jobs were "hard to get," the survey found, with that measure slipping to 44.7 percent from 46.6 percent. Those saying jobs were plentiful climbed to a still meager 5.7 percent, but that was still higher than April's 4.9 percent.
"Consumers are considerably less pessimistic than they were earlier this year," said Lynn Franco, director of The Conference Board's Consumer Research Center.

The Obama administration has invoked the state-secrets privilege in resisting a lawsuit filed by an Oregon charity whose attorneys may have been subjected to warrantless wiretapping. Late Friday, Chief U.S. District Judge Vaughn R. Walker issued a terse order that raised the prospect of "sanctions" for government lawyers who have not responded to his order for a plan for how the case should proceed. The sanctions may include awarding monetary damages to the charity, the al-Haramain Islamic Foundation.
The document amounts to "Judge Walker's enough-is-enough order," said Jon Eisenberg, an attorney for the now-defunct charity.
A bill moving through the Senate, written by Judiciary Committee Chairman Patrick J. Leahy (D-Vt.), would empower federal judges to review sensitive evidence and test government assertions. Neither the White House nor the Justice Department has taken a position on the legislation.

The slump in the U.S. housing market that caused the median value of homes to decline 24 percent since 2006 may bottom next month without any prospect of a rebound for another year, according to estimates from chief economists at Fannie Mae and Freddie Mac, the Mortgage Bankers Association and national realtors and homebuilder groups.

European industrial orders declined for an eighth month in March as the worst recession in more than six decades curtailed global demand for machines and equipment.

According to Bloomberg, after oil passed $60 a barrel for the first time in six months, the New York Mercantile Exchange’s fastest-growing options trade in July is for a 18 percent drop.

GM's 8.375% bonds maturing in July 2033 traded at around 5 cents on the dollar, unchanged from Friday, according to junk bond specialist KDP Investment Advisors. That's plunged from more than 20 cents in late March and more than 90 cents two years ago. Such depressed prices -- bonds are sold at 100 cents on the dollar -- indicate investors believe bankruptcy is probable.

June gold falls $5.60, or 0.6%, to end at $953.30. Crude for July delivery rose 23 cents, or 0.4%, to $61.91 a barrel in electronic trading.

Japan’s debt load is huge, and growing. It will spiral to 197 percent of GDP next year, according to an Organization for Economic Cooperation and Development estimate published before Japan unveiled the most recent of three stimulus packages on April 10. The plan will bring new bond sales to a record 44.1 trillion yen ($468 billion) in the year ending March.

"When you remove the government stimulus, what the private sector can generate in terms of growth feels like a recession," said Jeffrey Rosenberg, head of global credit strategy at Bank of America Securities Merrill Lynch in New York.

According to Bloomberg, Rosenberg thinks the U.S. economy may trudge along at a sluggish growth rate somewhere in the range of 0.5 percent to 1.5 percent while banks recover from the credit crisis, which could take another three years.

"If that's what you're able to generate, that economy is not generating the job growth required to bring the unemployment rate down," Rosenberg said.



Treasury Secretary Timothy Geithner said Thursday that the current crisis was "caused in large part by too much borrowing and too much lending. And the adjustment process of that will be difficult."



General Motors Corp has failed to persuade enough bondholders to accept a debt-for-equity swap, setting the stage for the largest-ever U.S. industrial bankruptcy within days.



The Dow Jones industrial average rose 196.17 points, or 2.37 percent, to 8,473.49. The Standard & Poor's 500 Index added 23.31 points, or 2.63 percent, to 910.31. The Nasdaq Composite Index gained 58.42 points, or 3.45 percent, to 1,750.43. When one considers the rise in equities today, one should take a long look at the sharp increase in interest rates on the long end of the treasury market as well as the continued weakness in housing prices. In my view, this is a great time to be taking profits in stocks and for cutting back on equity holdings.

“This entire spasm in the Treasury market has been due to a huge increase in inflation expectations,” wrote David Rosenberg, chief economist at Gluskin Sheff & Associates Inc. in Toronto, in a morning note to clients. “In fact, more than 100 percent of the backup in bond yields has been due to increased inflation expectations as measured by 10-year TIPS breakevens.”

The U.S. Dollar index failed to rally and ended at 80.09.

China And Russia

5/25/09 China And Russia

China Petroleum is buying 45.5% of Singapore Petroleum for just over $1 billion.

In the first quarter, Chinese exports are down 41%, Japanese exports down 38%, Germany's down by 32%.

The Oil Drum: "Russian and EU leaders met Friday in the eastern Russian city of Khabarovsk to heal a relationship badly damaged by the January gas cutoff of Russian gas that left thousands of people in Eastern Europe shivering in their homes.
The EU sought assurances that would never happen again. Russia refused to provide any. Instead, President Dmitry Medvedev said Moscow doubted that transit state Ukraine had enough money to pay for the gas Russia supplies, hinting at more disruptions to come.
But behind the bravado, Russia is worried. Europe's economic slowdown has led to a collapse in demand for natural gas, while January's crisis has triggered a new push by EU states to find alternatives to Russian imports."

A Russian investment group has offered to invest $200 million in Facebook at a $10 billion valuation for its preferred stock. It's unclear whether Facebook has accepted the offer.

The US’s top military official appeared to suggest on Sunday that the US could accept Iran retaining its capacity to enrich uranium provided it abandoned efforts to develop nuclear weapons.
Admiral Mike Mullen, the chairman of the joint chiefs of staff, also said he thought Iran could have its first nuclear bomb within one to three years – a shorter timeframe than envisaged by the 2007 National Intelligence Estimate.

Russia’s economy will shrink more than previously predicted this year, President Dmitry Medvedev warned today, after government figures showed the economy shrinking over 23 percent in the first quarter alone.

Officials had forecast earlier that Russia’s GDP would decline by only 2.2 percent this year, but that estimate has to be radically revised after the first quarter data was released Friday.

Outlining economic plans in a Kremlin meeting with government officials and top lawmakers, Medvedev said financial constraints would require strict economizing and tight controls over spending.

“In 2009, unfortunately, we expect a sharper fall in the GDP than we had thought,” Medvedev said.



According to the NY Times, as job losses rise, growing numbers of American homeowners with once solid credit are falling behind on their mortgages, amplifying a wave of foreclosures.



“We’re about to have a big problem,” said Morris A. Davis, a real estate expert at the University of Wisconsin. “Foreclosures were bad last year? It’s going to get worse.”



RGE Monitor:

2009 budget deficit estimated to be $1.84 trillion, 13% of GDP U.S. gov't debt stood at $11.3 trillion as of May 20 2009. Debt ceiling was raised from $10 trillion to $11.3 trillion when TARP-II was passed Oct 3 2008 U.S. public debt is $50 trillion, counting current & future obligations (Kiplinger)

Ukraine's economy may have contracted by 23 percent in the first three months of this year, President Viktor Yushchenko said Monday, calling it one of the fastest-shrinking economies in Europe.

John Hussman: "One of the concerns that seems to be developing here is that the stock market has gone a significant distance on what is now an article of faith (and a largely discounted one) that an economic recovery is close at hand. To some extent, that puts us in a situation where instead of requiring only that the news is “less bad than expected,” the maintenance and extension of recent gains will require actual improvement in economic reports. As continuing unemployment claims, retail sales and other data are suggesting, those improvements may not come as easily as expected."

The use of the drug bevacizumab (Avastin) in combination with chemotherapy greatly increases the risk of gastrointestinal perforations in cancer patients, new research has found.
These perforations are potentially life-threatening holes in the wall of the stomach, small intestine or large bowel.

General Motors Corp has still not managed to come to an agreement with bondholders over the $27 billion exchange offer, which is hoped to keep the automaker out of bankruptcy. GM filed a notice to the U.S. Securities and Exchange Commission, which they have yet to agree a deal on, and it will run out on May 26, 2009
Business Journal reports that General Motors should announce sometime this week if they are to extend the deadline. Reuters also reports that a spokesman for the creditors committee said that an offer for only 10 percent ownership was not good enough.
In the report, it says that bondholders are looking for 58 percent ownership in General Motors; the Obama administration has said that that will not happen. The bondholders are now thought to be getting ready for a GM bankruptcy filing.
The Financial Times quoted a source as saying, “Even if 100 percent of bondholders agree to a debt swap proposed by the company and the government, GM is likely to file for bankruptcy protection.”

The number of rigs drilling for natural gas in the United States fell by 17 to 711 this week, the lowest level in nearly 6-1/2 years.

Commercial Real Estate

5/24/09 Commercial Real Estate

Mike Burk: "Based on the number of consecutive down days, the market is oversold and likely to bounce. In the next week or two the blue chip indices could hit new highs which would likely be the top for this cycle.
I expect the major indices to be higher on Friday May 29 than they were on Friday May 22."

The New York Post points out that the debt backed by commercial real estate has hit $3.5 trillion.

Saudi Arabia’s oil minister expects oil to move back to $75, about 22% higher than it is now. He also expects that OPEC will not have to cut production for crude prices to rise. Demand is already strong in Asia, Saudi Arabian oil minister Ali al- Naimi
is reported by Reuters as saying.

Chesapeake Energy Corp. is "imminently about to close" on $1 billion in asset and output sales, Chief Financial Officer Marc Rowland said Wednesday.
The deals include $700 million of stakes in well output, known as volumetric production payments, and asset sales of $300 million, Rowland said at an investor conference in Austin, Texas, sponsored by UBS AG.

Eduardo Castro-Wright, Wal-Mart's Vice Chairman: "Leadership is about trust. It’s about being able to get people to go to places they never thought they could go. They can’t do that if they don’t trust you."

Illinois trucking company Navistar International Corp. has completed its $50 million purchase of bankrupt Oregon recreational vehicle manufacturer Monaco Coach Corp.
A federal judge in Delaware approved the sale Friday after learning there were no other bidders for the assets of Monaco, which has RV plants in Oregon and Indiana. The deal is set to close June 2.
It remained unclear whether Navistar will resume production at the plant in Coburg just north of Eugene or rehire any of the 2,000 employees laid off just before the company filed bankruptcy.
Monaco Coach had been one of the biggest private-sector employers in the Eugene area before the RV industry collapsed with the economy.
The other Monaco plant is in Elkhart-Goshen, Ind. Navistar has 17,000 employees at plants in Ohio, Alabama, Arkansas, Oklahoma and Canada.

A federal judge on Friday threatened to severely sanction the Obama Administration for withholding a top secret document he ordered given to lawyers suing the government over its warrantless wiretapping program.
U.S. District Judge Vaughn Walker in San Francisco ordered Justice Department lawyers to court on June 3 to tell him why he shouldn't award unspecified damages to the now-defunct Oregon arm of the Al-Haramain Islamic Foundation. The group alleges that government officials eavesdropped on their telephone calls without court authorization.
The National Security Agency has also refused the judge's previous orders to provide security clearances to two of the charity's lawyers so they can view the top secret document.

Randall W. Forsyth: "Having bailed out the banks and provided a lifeline to Chrysler and General Motors, how does Washington tell California, the eighth-largest economy in the world, to drop dead? That's the slippery slope that America's credit rating is on."

In April, Aerotek saw a 53% increase in people between the ages of 45 and 65 viewing temporary job openings on the company's Web site, compared with a year ago.

Business Week: "There’s almost no way GM can get 90% of the bondholders who own some $27 billion in GM debt to take a big cram down. GM may also need bankruptcy to get rid of the 1,600 dealers that the company wants to cut by the end of 2010. Some of them will just sell to other dealers, but plenty will need a swift kick from the company to go away. If those dealers want to sue, it’s big money from GM to buy out their franchise agreements. But in bankruptcy, GM can get rid of dealers much more easily. In fact, one executive told me that the only reason Pontiac was in the company’s original fix-it plan was that it would have saved more than a billion dollars if GM kept just one Pontiac model around. But once the company—absent former Chairman and CEO Rick Wagoner—became more open to bankruptcy, GM no longer needed to keep a token version of Pontiac to evade legal fees and settlement costs."

A decline in the air cargo freight market following the international financial crisis seems to have hit bottom, the head of the International Air Transport Association said Sunday.
Global air freight volumes have slumped amid the global economic downturn and in January saw a record 23 percent year-on-year dive.

Suitors for British biotech company Intercytex include U.S. pharmaceutical giant Pfizer, the Sunday Times reported, without citing sources.
Intercytex said last week it had had received "a number of approaches" from unnamed parties, sending its shares up over 50 percent.
Pfizer's interest is based on the work Intercytex is doing on a research project to cure age-related macular degeneration, which causes blindness, the newspaper said.

5/24/09 Commercial Real Estate

Mike Burk: "Based on the number of consecutive down days, the market is oversold and likely to bounce. In the next week or two the blue chip indices could hit new highs which would likely be the top for this cycle.
I expect the major indices to be higher on Friday May 29 than they were on Friday May 22."

The New York Post points out that the debt backed by commercial real estate has hit $3.5 trillion.

Saudi Arabia’s oil minister expects oil to move back to $75, about 22% higher than it is now. He also expects that OPEC will not have to cut production for crude prices to rise. Demand is already strong in Asia, Saudi Arabian oil minister Ali al- Naimi
is reported by Reuters as saying.

Chesapeake Energy Corp. is "imminently about to close" on $1 billion in asset and output sales, Chief Financial Officer Marc Rowland said Wednesday.
The deals include $700 million of stakes in well output, known as volumetric production payments, and asset sales of $300 million, Rowland said at an investor conference in Austin, Texas, sponsored by UBS AG.

Eduardo Castro-Wright, Wal-Mart's Vice Chairman: "Leadership is about trust. It’s about being able to get people to go to places they never thought they could go. They can’t do that if they don’t trust you."

Illinois trucking company Navistar International Corp. has completed its $50 million purchase of bankrupt Oregon recreational vehicle manufacturer Monaco Coach Corp.
A federal judge in Delaware approved the sale Friday after learning there were no other bidders for the assets of Monaco, which has RV plants in Oregon and Indiana. The deal is set to close June 2.
It remained unclear whether Navistar will resume production at the plant in Coburg just north of Eugene or rehire any of the 2,000 employees laid off just before the company filed bankruptcy.
Monaco Coach had been one of the biggest private-sector employers in the Eugene area before the RV industry collapsed with the economy.
The other Monaco plant is in Elkhart-Goshen, Ind. Navistar has 17,000 employees at plants in Ohio, Alabama, Arkansas, Oklahoma and Canada.

A federal judge on Friday threatened to severely sanction the Obama Administration for withholding a top secret document he ordered given to lawyers suing the government over its warrantless wiretapping program.
U.S. District Judge Vaughn Walker in San Francisco ordered Justice Department lawyers to court on June 3 to tell him why he shouldn't award unspecified damages to the now-defunct Oregon arm of the Al-Haramain Islamic Foundation. The group alleges that government officials eavesdropped on their telephone calls without court authorization.
The National Security Agency has also refused the judge's previous orders to provide security clearances to two of the charity's lawyers so they can view the top secret document.

Randall W. Forsyth: "Having bailed out the banks and provided a lifeline to Chrysler and General Motors, how does Washington tell California, the eighth-largest economy in the world, to drop dead? That's the slippery slope that America's credit rating is on."

In April, Aerotek saw a 53% increase in people between the ages of 45 and 65 viewing temporary job openings on the company's Web site, compared with a year ago.

Business Week: "There’s almost no way GM can get 90% of the bondholders who own some $27 billion in GM debt to take a big cram down. GM may also need bankruptcy to get rid of the 1,600 dealers that the company wants to cut by the end of 2010. Some of them will just sell to other dealers, but plenty will need a swift kick from the company to go away. If those dealers want to sue, it’s big money from GM to buy out their franchise agreements. But in bankruptcy, GM can get rid of dealers much more easily. In fact, one executive told me that the only reason Pontiac was in the company’s original fix-it plan was that it would have saved more than a billion dollars if GM kept just one Pontiac model around. But once the company—absent former Chairman and CEO Rick Wagoner—became more open to bankruptcy, GM no longer needed to keep a token version of Pontiac to evade legal fees and settlement costs."

A decline in the air cargo freight market following the international financial crisis seems to have hit bottom, the head of the International Air Transport Association said Sunday.
Global air freight volumes have slumped amid the global economic downturn and in January saw a record 23 percent year-on-year dive.

Suitors for British biotech company Intercytex include U.S. pharmaceutical giant Pfizer, the Sunday Times reported, without citing sources.
Intercytex said last week it had had received "a number of approaches" from unnamed parties, sending its shares up over 50 percent.
Pfizer's interest is based on the work Intercytex is doing on a research project to cure age-related macular degeneration, which causes blindness, the newspaper said.